Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer

UPDATED: Jul 14, 2021

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In a nutshell...

  • Paying off premiums off is common in the auto insurance world
  • Costs may increase or decrease when paying an insurance policy in full
  • Adding new coverage after paying in full may lead to a new bill and slight balance due

Paying for car insurance is one of those things accepted as a part of life. Being a responsible driver means acquiring a good insurance policy. At the very least, comparison shopping for a top policy leads to protecting others from financial harm when a driver causes an accident.

Smart drivers also acquire additional coverage in order to protect themselves from financial costs. And then there are those motivated by the law.

A particular state might have significant civil and criminal penalties on the books requiring auto insurance coverage. Florida is an example of one such state.

Insurance coverage, liability and more, is only valid when active and is only active when paid in a timely manner. One way to make sure a policy is always active for its term is to pay the entire bill all at once.

Those wondering if an insurance company will allow this should be thrilled about some simply good news.

Paying off a car insurance policy early and in full is definitely possible. Consumers and insurance companies alike may even prefer to do things this way.

Make sure you’re not overpaying for the coverage you need. Compare car insurance quotes today to find the best rate!

Due Dates and Payments

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Not everyone is able to pay off a full premium on a car insurance policy all at once. Paying more than $1,000 for 12 months of coverage may be a financial stretch – if not an impossibility – for some.

Insurance companies realize this issue of feasibility and are frequently willing to break payments up for those trustworthy drivers known to be in good standing.

Policyholders may have the option of paying monthly, quarterly, or semi-annually. As long as the payments are made on time and within the established grace period, the policy remains active. Just be sure to ascertain whether or not there is a grace period.

Claims can only be opened when a policy is active.

If a policy is canceled due to nonpayment, filing any claims becomes impossible. A canceled policy, for all intents and purposes, no longer exists.

One way to avoid seeing a policy canceled is to pay the policy off in advance of the due date.

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Paying Off a Policy

Auto insurance policies are sold in set terms. A one-year term means the policy, as written, is in effect for 12 months. A set amount of money must be paid to satisfy the contractual agreement of the policy.

The due dates associated with making partial payments refer to minimum payments that must be made at the time of the due date.

Paying off the full policy is possible at any time. The insurance provider is not exactly going to reject money owed to it.

So, a person with a 12-month payment agreement could pay the minimum amount due every month for three months and then pay for the remaining nine months all at once.

Unless the policy explicitly states this cannot be done, doing so is acceptable. And the policy will doubtfully say paying the policy in advance is barred.

Some may choose to pay “a little extra” each month. A twelve-month payment plan could end up being paid in 10 months. The extra money could be directed towards the second payment of a bi-annual plan. Policyholders do have some flexibility.

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Penalties and Costs

Shockingly, a penalty might be imposed if the policy is paid earlier.

Based on the terms of the policy, requesting a payment plan as opposed to paying annually might come with costs to the insurance company. So, those who ask for an installment plan and pay it off may be hit with a penalty.

Not all policies would have such a rule. This is why reading and reviewing as many comparison quotes as possible is necessary. Policyholders do need to feel comfortable with the terms and costs they sign up for.

Cutting Policy Costs

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Sometimes, paying off the policy early could lead to avoiding administrative fees. An insurance company may charge extra for payment plans. A person who wants to pay monthly may be charged, say, three dollars per month in the form of an installment agreement fee.

Paying the policy off after the fourth month should eliminate the remaining $24 in fees.

Discounts may even be available to those who pay off the entire yearly amount of a policy.

A discount comes with an obvious enticement to pay the policy in full and save the insurance company hassles and extra work. The policy is paid.

The collection of the account is closed until the term expires and the time comes to renew. The insurance company saves more than what it “pays” in the form of a discount.

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Changing the Policy

Auto insurance policies, on their basic level, cover the following:

  • Liability for bodily injury
  • Liability for death
  • Liability for property damage inflicted on others

Drivers may wish to acquire additional coverage to protect themselves and their vehicles or they may not.

A close call with another car or a lapse in judgment leading to the near miss of a traffic pole might lead some into purchasing

Once the policy is changed for added coverage, the price of the policy is going to go up. An additional balance would be added to the policy. The balance could be as little as $10. Regardless, the balance needs to be paid to be paid by the prescribed due date.

Otherwise, the new, added coverage might not be in effect.

As a rule, always ascertain if a new balance is due once a change to a policy is made. This clarification should assist with eliminating a host of problems.

Insurance plays an important role in protecting the insured’s financial health. Buying a policy and paying the policy off as quickly as possible makes prudent sense. The same is true of looking for a solid policy with the most appropriate level of insurance.

Buy what is needed and pay swiftly. And make sure you don’t pay more than you need to. Compare car insurance quotes today by entering your zip code below.